Last update: 18.03.2017 15:38
We humans are rational to a limited extent.
This saves us time.
But irrationality can have high costs, especially when it comes to financial decisions.
Irrational decisions often cannot be clearly identified.
This is because even rational decisions are often made unconsciously.
We are guided by experiences and feelings and cannot always separate the two.
When does our mind decide, when do our emotions?
Especially when it comes to financial issues, it is dangerous to let your emotions get the better of you.
Take Warren Buffet, for example, probably the most successful investor of all time.
It is often said of him that he would focus on his “Gut feeling” leave.
He has it in his blood.
How should we understand that?
He talks about the “temperament” that an investor needs to enjoy investing and stick with it.
He also warns that “nothing numbs rationality more than money earned without effort.”
He also says that “successful investing takes time, discipline and patience.”
It doesn’t sound that simple with the gut feeling.
Warren Buffet has decades of experience and makes his judgment based on a variety of criteria.
He takes a close look at the companies and people he invests in.
And yes, he may not even be aware of some of his criteria.
Because he is a professional, he has already automated this decision-making process. Automation and emotions are two different things. Both help us to make decisions quickly and both are commonly referred to as gut feelings.
But let’s take a closer look at the differences.
For example, we have Automatedhow we lock the front door in the morning, we’ve done it a thousand times.
We no longer have to consciously deal with it.
And for this reason, we probably can’t remember how we locked the front door this morning.
This is automation, internalized knowledge.
At some point, we decided to lock the front door every morning. quite rational. The following is different.
We entrust our front door key to our new neighbor because he seems trustworthy, drives a Volvo and is, after all, our neighbor… We don’t know whether he uses the opportunity to spy on our cupboard or sample our expensive whiskey.
But we don’t suspect it.
So have we imagined this well thought out?
No, it’s a gut feeling, or just positive emotions opposite a sympathetic-looking neighbor.
Prof. E. Winter has researched the topic and gets to the heart of the matter: It is not complex information that gets in the way of good decisions, but our emotions. We want to feel good, to have a good feeling.
We let ourselves be guided by emotions.
When we talk about gut feeling, we don’t know how much of it is based on experience.
So when it comes to financial matters, let’s consciously use our brains.
How do you do that?
It’s actually quite simple… Be aware of it.
Am I buying the share because of the sounding name or the performance?
Is the insurance advisor just likeable or do I also get the Facts I need to decide on a financial product?
Does my bank simply give me a good feeling or does it really perform best?
